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Bank of Korea hikes key interest rate to 1% Updated: 2021-11-25 17:05:28 KST


South Korea's central bank has hiked its key interest rate to one percent, up 25 basis points amid rising inflationary pressure.
Even though the pandemic is still on-going, the Bank of Korea showed confidence that the country's current recovery trend could withstand the possible economic blow.

"The Monetary Policy Board has raised the rate, considering how the domestic economy is on the recovery track despite the global supply bottleneck, and that inflation is forecast to accelerate further than previously expected, raising the risk of financial imbalance."

He added that the hike was not large and that it is still within the range of monetary easing.
The hike comes only three months after the central bank raised the rate to point-seven-five percent.
And this also marks the first time since March last year that the rate has risen back to the 1-percent mark.
The Bank of Korea had been keeping its key interest rate below 1-percent to weather the economic impact of the pandemic.

But now, rising inflation has become a more pressing issue to be dealt with.
Consumer prices in South Korea saw their biggest jump in almost 10 years last month, up 3.2 percent on-year.
It was the first time that the Consumer Price Index has gone above three percent since 2012, and is far higher than the government's target of 2 percent.
Experts say that rising household debt also made the hike inevitable.

"also because a lot of people seem to be trying to get loans while the interest rate is still low so if you wanted to control the household debt we had to raise the interest rate multiple times as quickly as possible."

Household debt in the third quarter came to around 1.6 trillion U.S. dollars.
Meanwhile, the central bank has maintained its previous economic growth forecast for the country.
It projected on Thursday a four percent growth rate in GDP for 2021 and 3 percent next year, the same as the previous forecast made in August, based on robust exports and a rebound in consumer sentiment.

"The central bank has also hinted at another possible rate rise in the near future, after carefully monitoring the country's economy and COVID-19 situation as well as changes in other major economies' monetary policies. Kim Sung-min, Arirang News"
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